Friday, April 16, 2010


I never thought I would see it, but it has happened. The SEC has filed civil fraud charges against Goldman Sachs. Today, April 16, 2010 the government has made a solid first step towards bringing the cretins and thieves of Wall Street to justice. Goldman is one of the key players in the American meltdown and they have been totally immune to justice so far.

Filing the 22 page complaint in the Southern New York US District Court, the SEC has charged both the company and specifically one of its vice presidents with fraud. The particular fraud in question scammed over a billion dollars from investors. The vice president charged is Fabrice Tourre. He was in charge of an operation in which Goldman allowed a 3rd party hedge fund – Paulson and Co, to mislead investors.

In exchange for a fee of 15million Goldman allowed Paulson to place tottering investments for which it held credit default insurance into a basket of securities being sold to the public as solid and backed by the good will of Paulson and Goldman Sachs. All the time they were selling these investments as sound and well connected they were buying up insurance positions which would net them huge profits when the investments collapsed. Make no mistake, the investments were going to fail – that is the very point of their creation. Paulson made sure the bundled securities were packed with low grade mortgages on the verge of collapse. It was like selling a house with walls made of matches, telling the buyer that it was safe and sound and then taking out a fire policy.

In fact, the fund was designed from the very beginning to collapse so that Paulson and Co. could cash in their insurance. As the Director of SEC enforcement said: “The product was new and complex but the deception and conflicts are old and simple” It was a total scam from beginning to end and it cost investors over a billion dollars. Of course this is just the tip of the iceberg and Goldman Sachs will mobilize all its lawyers and lobbyist to defeat this indictment. Already the corporate shills in the media are calling this political showboating by the SEC. But, however improbable – it is still a sign of hope and I wanted to bask in that light however brief it may be.

This is a sign that the SEC Chair Mary Shapiro is still struggling to bring some justice to this scandal. She and most especially TARP Congressional Oversight Committee chair Elizabeth Warren have been dim beacons of hope in this latest financial debacle. I fear this may just be a little bone tossed to the masses as a show of enforcement. But, perhaps integrity may yet prevail and bring at least some justice to this part of the American meltdown.

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